Yahoo Finance Conn's Inc (CONN) Q4 2024 Earnings Call Transcript Highlights: A Turnaround Tale Amidst Challenges
Total Revenues: $366.1 million for the fourth quarter, a 9.3% year-over-year increase.
GAAP Net Income: $43.3 million for the fourth quarter, compared to a GAAP net loss of $42.8 million in the prior year.
Adjusted Net Loss: $31 million for the fourth quarter, compared to a net loss of $36.7 million in the same period last fiscal year.
Retail Segment Revenue: $296.9 million in the fourth quarter, up 9.6% year over year.
Retail Segment Operating Loss: $38.1 million for the fourth quarter, compared to a loss of $19.5 million in the prior year.
Adjusted Retail Segment Operating Loss: $21.8 million for the fourth quarter, compared to a loss of $11.7 million in the same period last year.
Credit Segment Revenue: $70.8 million in the fourth quarter, a 10.4% year-over-year increase.
Credit Segment Loss Before Taxes: $53.1 million in the fourth quarter, compared to a loss of $27 million in the same period last fiscal year.
Adjusted Credit Segment Operating Income: $1.4 million for the fourth quarter, compared to an operating loss of $13.9 million in the prior year.
Same-Store Sales: Down approximately 13.5% quarter to date.
E-commerce Sales: $109.3 million for the year ending January 31, 2024, a 38.2% increase from last fiscal year.
Annualized Cost Synergies: More than $100 million expected over the next 18 months.
Revenue Synergies: Over $50 million expected over the next 18 months.
Annual Adjusted EBITDA: Expected to be between $180 million to $220 million on total annual sales of between $2 billion to $2.2 billion by the end of the next fiscal year.
Release Date: April 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Conn's Inc (NASDAQ:CONN) successfully closed a transformative transaction with W.S. Badcock, creating a leading home goods retailer with over 550 retail locations.
The integration of W.S. Badcock is expected to drive material cost savings, enhance gross margins, and improve operating leverage.
Conn's Inc (NASDAQ:CONN) is executing against strategic priorities, including transitioning Badcock's credit program to Conn's in-house loan product, which is anticipated to increase average ticket sales.
The company reported a 9.3% year-over-year increase in total revenues for the fourth quarter, with GAAP net income of $43.3 million.
Conn's Inc (NASDAQ:CONN) is ahead of plan in realizing cost synergies, having removed approximately $50 million of combined annualized expenses in the fourth quarter.
Negative Points
Quarter-to-date same-store sales for the combined business are down approximately 13.5%, reflecting ongoing industry headwinds.
The company reported a non-GAAP net loss of $31 million for the fourth quarter, compared to a net loss of $36.7 million in the same period last fiscal year.
Retail segment operating loss was $38.1 million for the fourth quarter, with an adjusted retail segment operating loss of $21.8 million.
Credit segment reported a loss before taxes of $53.1 million in the fourth quarter, despite stable credit trends.
E-commerce sales at Badcock reflected a 27% year-over-year decline, indicating a need for improvement and integration with Conn's e-commerce capabilities.
Q & A Highlights
Q: Can you talk about your expectations for store count at both Conn's and Badcock's in the near term? A: Norman Miller, Conn's Inc-President & CEO, indicated that in the near term, there should be no variance from the current 550 stores. However, longer-term, there might be some consolidation, especially in Florida and North Carolina, but this is not expected until the next fiscal year.
Q: On the gross margin expansion in this quarter. Can you go into more detail on some of the drivers behind that? A: Norman Miller explained that the product mix shift is the primary driver, accounting for about 80% of the improvement, with higher-margin furniture and mattress sales from Badcock contributing significantly. Additionally, improvements in freight costs on both sides of the business have also helped.
Q: On credit applications for the quarter, year-over-year growth is moderating, but the mix of sales financed continues to grow. Can you provide any commentary on what's driving that dynamic? A: Norman Miller mentioned that the moderation in application growth is due to lapping the previous year's increases. However, growth continues due to an increase in average ticket size and better usage of approved applications, as the company gets more effective at targeting the right customers.
Q: On the timeline for integrating Badcock onto Conn's financing platform, will corporate stores from Badcock have more or less access to financing products than franchisee stores? A: Norman Miller clarified that there is no differentiation between corporate and dealer stores in terms of access to financing products. The credit infrastructure system, which controls underwriting and the entire credit process, will be the same across all stores.
Q: Any commentary on tax refund season so far? Any noticeable changes in retail sales activity from that or portfolio collection? A: Norman Miller observed that post-COVID, the tax season has seen a solid performance in collections similar to the previous year. However, there has been a less robust uptick in retail sales during the tax season compared to pre-pandemic levels, likely due to a pull forward of demand and the current state of the consumer.
This article first appeared on GuruFocus.
